A charge to inheritance tax (IHT) arises: • on the death of an individual• on lifetime gifts where the donor dies within 7 years of the date of a gift• on some lifetime gifts which are taxed at the date of the gift.The donor is the person who makes the transfer of the asset, and therecipient is known as the donee. Transfer of value A transfer of value is a gift of any asset which results in a reduction in thevalue of the donor’s estate. To be treated as a transfer of value the transfer must be a 'gratuitous disposition'. This basically means a gift. A bad business deal will therefore not be liable to inheritance tax, eventhough there is a fall in value of the estate, as it was not the donor's intentionto give anything away. To calculate the transfer of value for IHT purposes, the loss to donorprinciple is used (also referred to as the diminution in value concept). The loss to the donor, is the difference between the value of the donor’sestate before and after the gift, and is the starting point for IHTcalculations:£Value of estate before gift XLess: Value of estate after gift (X)—Diminution in value or transfer of value X The loss to the donor is usually the open market value of the asset gifted. However, in some circumstances, the transfer of value from the donor’spoint of view is not necessarily the same as the value of the asset receivedfrom the donee’s point of view. This is most common with unquoted shares, where a controllingshareholding has a higher value per share than a minority shareholding.

Chargeable property All property to which a person is beneficially entitled is deemed toform part of their estate. Therefore, a gift of any asset is a transfer of value.For the purposes of the F6 examination there is no such thing as an exemptasset for IHT purposes. Chargeable persons A chargeable person for the purposes of the F6 examination will always bean individual. Individuals All individuals are potentially liable to IHT. An individual who is domiciled in the UK is liable to inheritance tax on theirworldwide assets. If not UK domiciled, they are liable on UK assets only. However, for the purposes of the F6 examination, all individuals will be UK domiciled. Note that spouses and partners in a registered civil partnership arechargeable to IHT separately.